U.S. oil drillers continue to pump from key formations -Baker Hughes

By Scott DiSavino
June 5 (Reuters) - U.S. oil drillers boosted activity in
four key basins this week, bringing the promise of additional
oil to a market that faces OPEC's Friday decision to leave
production caps unchanged.
Oil drillers added rigs in Texas's Permian and three other
U.S. shale basins, data showed on Friday, the strongest sign yet
that higher crude prices are coaxing producers back to the well
pad after a six-month slump in activity.
Overall, however, U.S. drillers reduced the number of active
rigs by four this week, oil services company Baker Hughes Inc
said. It was the 26th straight weekly decline, bringing
the total down to 642, the lowest since August 2010. Producers
have shifted rigs to the most productive formations amid the
price rout.
As widely expected, the Organization of the Petroleum
Exporting Countries on Friday decided to keep its 30 million
barrel per day crude production target for its 12 members
unchanged in an effort to defend the group's market share.
The market had been braced for the producer group's
decision, which pairs with the slowly declining rig count in
recent weeks to boost supply to a market that is already awash
in oil.
With some OPEC countries like Saudi Arabia and Iraq pumping
oil at record or near record levels, the group is trying to keep
crude prices low enough to support global oil demand growth
while retaining market share by driving out more expensive
producers.
OPEC faced "significant challenges in achieving a likely
impossible trinity of higher oil revenues, market share
preservation, and robust long-term demand," analysts at Barclays
said in a report this week.
Since the number of oil rigs peaked at 1,609 in October,
U.S. drillers have eliminated thousands of jobs and idled more
than half of the country's active rigs as U.S. crude futures
collapsed 60 percent from over $107 a barrel last June to a
six-year low near $42 in March on oversupply concerns.
But U.S. energy companies, including EOG Resources Inc
and Pioneer Natural Resources Co, have started
to return to the well pad as prices rebounded to over $60
earlier in May. Prices so far this week have averaged about $59
a barrel.
"U.S. producers will ramp up activity given improved returns
with costs down by at least 20 percent and producers
increasingly comfortable at the current costs/revenue/funding
mix," analysts at Goldman Sachs said in a report.
Last week, U.S. crude production climbed to nearly 9.6
million barrels a day for a second week in a row, its highest
level since the early 1970s, according to government data.
(Reporting by Scott DiSavino; Editing by Meredith Mazzilli)